Bega denies big cheese ambitions

Bega Cheese chairman
Barry Irvin
has hosed down speculation that the privately owned company could mount a takeover of Australia’s largest dairy processor
Warrnambool Cheese & Butter
Factory when restrictions on the level of ownership of the company are lifted on Wednesday.

The shareholder cap, which prevents any one holder owning more than 15 per cent of Warrnambool, has protected the former co-operative from hostile takeover since it listed in May 2004.

Shares in Warrnambool are trading at a three-year high as takeover speculation mounts.

Australia’s biggest dairy co-operative Murray Goulburn has been sitting on an 11.4 per cent stake since its unsuccessful offer last year.

Analysts say it could return to target Warrnambool while global dairy giants including Canada’s Saputo could also take an interest.

Any such moves would put pressure on Bega to consider its next move.

The company became Warrnambool’s “white knight" last year, thwarting Murray Goulburn’s advances by taking a 15 per cent stake through a placement at $2.90 a share.

“We said at the time that [a takeover] was not on our agenda and I can honestly say that it is still not," Mr Irvin told The Australian Financial Review.

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Bega is instead pursuing its own listing. Mr Irvin said the company expected to lodge a prospectus with the Australian Securities and Investments Commission in a fortnight. It plans to list in early July.

He said he expected to appoint a stockbroker by the middle of this week to spearhead the $350 million to $400 million float, which will raise new capital of $35 million. Boutique investment bank Kidder Williams is acting as adviser.

Mr Irvin said Warrnambool Cheese would be a key player in inevitable dairy industry rationalisation.

“We wanted to make sure we had a position at the table in talking about what might happen there," he said.

Mr Irvin said the relationship between the two companies had been “unfolding" as it explored ways for Warrnambool, which is the biggest single-site cheese manufacturer in Australia, and Bega, which owns Australia’s two biggest cheese cutting and packaging sites, to find opportunities that benefited both organisations.

“The opportunities may be the international market rather than the domestic market but that is probably secondary to the fact that we said this would be a good investment," Mr Irvin said.

Mr Irvin said Bega had not made a decision on whether it could be the ultimate owner of Warrnambool.

“We haven’t made any decision," he said. “It is notable that the Warrnambool share price is pretty strong at the moment. At the level it is currently at we would have to think carefully before we made any decisions. I do not rule it in or out."

Bega has appointed Aidan Coleman, chief executive of its Tatura Milk Industries subsidiary, to chief executive, allowing Mr Irvin to step back from executive duties and satisfy the Australian Securities Exchange’s preference for a separation between board and management duties.